(Kitco News) – After weeks of volatility and sharp retracements, the price action was largely up and to the right this week, and the gold price would never come close to testing $4,000 support.
Spot gold kicked off the week trading at $4,074.12, and after a quick dip down to $4,044 in the early hours of trading, a triple bounce at this level gave traders the confidence to push prices steadily higher.
By Monday's North American open, spot gold had already tested $4,080 per ounce twice, and shortly after 1:00 p.m., the yellow metal broke decisively through resistance at $4,100. The Asian session saw gold trade as high as $4,152 per ounce, and after a pullback during the European session to retest support near $4,115, North American traders also topped out at $4,152 in the early afternoon.
With the higher range now firmly established, Asian traders wasted little time pushing the yellow metal to a fresh weekly high just shy of $4,170 per ounce. After this, the channel narrowed even further, with spot gold trading between $4,145 and $4,170 through the U.S. Thanksgiving holiday.
Thursday evening saw gold's second decisive move higher, with the yellow metal topping out above $4,192 per ounce early in the Asian session. And after a dip back down to test support near $4,155, the stage was set for Friday's dramatic final act.
The ongoing strength of the metals complex– with silver and copper now making runs toward all-time highs – captured the imaginations of American traders returning to their desks, and spot gold rocketed to the very edge of $4,200 at the open. By 1:30 p.m., the yellow metal had topped out at the ultimate weekly high of $4,226.91 per ounce, and it held nearly all of its gains into the weekly close.
The latest Kitco News Weekly Gold Survey showed the overwhelming majority of Wall Street flipping back to a bullish bias on the precious metal’s near-term prospects, while Main Street investors also reinforced their bullish majority.
“Up,” said James Stanley, senior market strategist at Forex.com. “I’ve remained bullish for a while now and see no reason to change now. Notably, this week has brought a break of the triangle formation, which looks like another bull pennant, which would be the third such formation for gold since the rally in spot started in February of last year from the $2k level.”
“These moves are tough to chase as there’s still possibility that longer-term bulls use the bounce to take some profit off the table before year-end,” Stanley added, “but like I’ve been saying for the duration of the formation, that support is still attractive, and the 4150 area presents another such spot.”
“Unchanged,” said Adrian Day, president of Adrian Day Asset Management. “Until the Federal Reserve’s December interest rate decision is behind us, gold will likely hold gains but fail to push higher. A rate cut is already priced in, indicating that the risk now is that the Fed does not cut rates. However, it would appear the low after the October highs is in and gold may meander before another push higher.”
“Up,” said Rich Checkan, president and COO of Asset Strategies International. “Peace is not breaking out in Ukraine, and expectations of a third interest rate cut by the FOMC in December are on the rise again. Of course, both are bullish for gold.”
“I am bullish on gold for the coming week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Gold has been climbing lately as speculation on the result for the upcoming Fed meeting swings back toward hopes for a rate cut to end the year.”
Cieszynski warned, however, that there is a lot of data coming next week, which could cause some volatility in the gold price.
This week, 14 analysts participated in the Kitco News Gold Survey, with the momentum swinging back in favor of the bulls after the yellow metal’s strong showing. Fully 11 experts, or 79%, expect to see gold prices rise during the week ahead, while only one, or 7%, predicted a price decline. The remaining two analysts, representing 14% of the total, expected the yellow metal to return to its sideways churn next week.
Meanwhile, 260 votes were cast in Kitco’s online poll, with Main Street investors’ bullish sentiment also strengthening after gold pulled away from its $4,000 support level. 183 retail traders, or 70%, looked for gold prices to climb higher next week, while another 29, or 11%, predicted the yellow metal would lose ground. The remaining 48 investors, representing 19% of the total, expected prices to consolidate during the week ahead.
Next week will see some significant government data for markets to digest, though the key October nonfarm payrolls and third-quarter GDP reports will not be among them.
On Monday, markets will be paying attention to ISM Manufacturing PMI for November, with ISM Services PMI following on Wednesday, along with ADP private employment data for October, which will get more scrutiny than usual in the absence of nonfarm payrolls.
Thursday will see the release of weekly jobless claims, and the week wraps up with October Core PCE and the University of Michigan preliminary Consumer Sentiment Survey for December.
Marc Chandler, managing director at Bannockburn Global Forex, said the gold price is on the verge of breaking above its recent range to challenge the all-time high.
“Although spot gold alternated between gains and losses on a daily basis over the past week, the net result has been a roughly 2.75% gain, the most in six weeks,” he noted. “The market feels more confident of a Fed cut next month, and the Dollar Index fell by 0.5%.”
Chandler said gold “appears to have broken above the downtrend line connecting the record high in late October (~$4381) and the November high (~$4245).”
“The pullback from the October high looks corrective in nature,” he added. “Nearby resistance is in the $4195 area and taking this out could target the November high.”
Alex Kuptsikevich, senior market analyst at FxPro, expects gold prices to decline next week.
“Gold is in a tug-of-war,” he said. “Its price is being driven up by growing expectations of policy easing, which are weighing on US government bond yields. On the other hand, active work on a peace plan for Ukraine is acting as sand under the wheels of the gold rally.”
Kuptsikevich noted that in the last three years since the global gold rally began, the price has risen by 170%, “driven by frenzied demand from emerging market central banks for physical gold, at the expense of the US dollar.”
“Rumours of Kevin Hassett’s appointment as Fed chair have allowed the futures market to lower its implied terminal rate to 2.75%,” he added. “At one or more FOMC meetings, borrowing costs could fall by 50 basis points. As a result, the US dollar and Treasury yields are expected to fall.”
“This creates a tailwind for gold, allowing UBS to forecast a rally to $4,500 by the end of 2026. Deutsche Bank sees an average price of $4,450 per ounce,” Kuptsikevich said. “Meanwhile, we continue to see downside risks for gold prices, as more investors may want to lock in profits from the 48% gain since the beginning of the year.”
“We expect gold to pull back to $4,040 by the end of next week, erasing the gains of the past week.”
Michael Moor, founder of Moor Analytics, believes gold will post further gains next week.
“In a Higher time frame: I cautioned on 8/16/18 the break above $1,179.7-$1,183 warned of renewed strength,” he said. “We have seen $3,214.3. This is OFF HOLD. On a Medium time frame: The break above 31482 warned of strength for days—we rallied $1,249.8. The trade above 32214 projects this upward $100 (+)—we rallied $1,176.6. The trade above 32236 warned of renewed strength—we rallied $1,174.4. The trade above 32392 projected this up 115 (+)—we attained $1,158.8. The trade above 33411 has brought in $1,056.9 of strength. The trade above 33850 has brought in $1,013.0 of strength. The trade above 34186 has brought in $979.4 of strength. The break back above 35640 has brought in $834.0 of strength. The trade above 36658 has brought in $732.2 of strength. The trade above 37143 has brought in $683.7 of strength. The break above 37725 has brought in $625.5 of strength. The trade back above 38828 brought in $515.2 of strength. These are OFF HOLD.”
“On a Lower time frame: The trade back above 40701 (-12 per/hour) warns of decent strength—we have rallied $157.4 (including spread differential and so forth below),” Moor said. “The trade above 41738 (-3.5 tics per/hour) now warns of decent strength, likely for days—we have seen $53.7. If we fail back below decently, look for decent pressure. Tuesday we also left a medium bullish reversal below.”
And Kitco senior analyst Jim Wyckoff said gold and silver traders are buying the charts on Friday as their near-term technical postures have become more bullish this week.
“Technically, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at the November high of $4,285.60,” Wyckoff said. “Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,000.00. First resistance is seen at $4,250.00 and then at $4,285.60. First support is seen at the overnight low of $4,174.60 and then at $4,150.00.”
At the time of writing, spot gold last traded at $4,215.82 per ounce for a gain of 3.50% on the week and 1.37% on the day.
